Pimco is warning that changing interest rate expectations and market uncertainty could drive Treasury volatility in 2017.

ETFs that track Treasuries may see greater price swings on market uncertainty about Federal Reserve policy, the asset manager said in a new blog post. These ETFs "can experience volatility spikes from changes in interest rate expectations because their benchmarks and stated strategies focus mechanically on the front end of the yield curve, which is most susceptible to those expectations," Pimco's analysts wrote, adding that potentials could be "very low."

Pimco recommends investors consider bond ETFs that focus on short duration issues, such as its own PIMCO Low Duration Active Exchange-Traded Fund (LDUR). Other short-term bond ETFs include iShares Short Maturity Bond ETF (NEAR) and Guggenheim Enhanced Short Duration Bond ETF (GSY). LDUR has outperformed its peers, rising 2 percent in the last year versus near flat returns for NEAR and GSY over the same time period.

Investors often turn to short-term bond ETFs to offset risk from stock market exposure. Financial advisors often recommend a combination of passive index funds like Vanguard Total Stock Market ETF (VTI), Vanguard 500 ETF (VOO) and SPDR S&P 500 ETF (SPY) and a Treasury fund, with allocations varying according to risk tolerance, market view and the individual investor's time horizon.

Pimco also warns macroeconomic risks are increasing for Treasury holdings as a result of higher inflation, which is broadly expected in the near term. "Treasury bill indexes, for instance, have exhibited persistent declines in purchasing power in recent years – and with expectations for rising inflation under 'Trumponomics,' such erosion will likely only worsen," Pimco warned.